When the Licensed Insolvency Trustees speak with someone who is thinking about filing bankruptcy, we try to use simple terms and phrases so we don’t leave them with more questions than they had when they walked through the doors. There is a lot of technical, legal mumbo jumbo involved in the bankruptcy process, and it is our goal to talk about it by talking about how each step, each unfamiliar term, applies to everyday life. Below is a glossary we have put together of common bankruptcy terms:
Filing for bankruptcy is like hitting a giant pause button on all of your debts, this is known as an automatic stay. During the automatic stay, collectors cannot hassle you for payment, wage garnishments and foreclosures are paused.
People or businesses who are owed money are known as creditors.
People or businesses who owe money are known as debtors.
Once you’ve completed your bankruptcy, your debts will be discharged. This means your debts are forgiven.
If a debtor files for bankruptcy and is going to sell off assets to repay debts, the debtor can exempt certain assets from sale.
If a buyer had to go into debt to purchase an item, the seller might have a lien on the item. This means that the seller has the right to repossess the item and either hold it until they are repaid by the debtor, or sell it and use the profits to pay themselves back.
There are two basic kinds of debt – secured and unsecured. Secured debt is typically attached to items that can be repossessed to pay back the seller if necessary. A house with a mortgage on it is an example secured debt. Unsecured debt isn’t attached to something that can be repossessed to pay back the seller.
If you have been discussing bankruptcy with us or with any other Licensed Insolvency Trustee, and you still have questions, contact us today. We will try our best to explain the process and can discuss what the best option is for you.